Debt

Application

We’ve learned some great things about paying off debt in 2 Kings 4:1-7. So let’s take a look and see how we can apply these principles to our situation.

Early Pay-Off Scenarios

Do you know what the best debt is- no debt! But if down the road you find yourself in debt, you can remember this strategy. Paying extra on debt every month can have a huge impact on how quickly you pay off your debt and the amount of interest you pay.

The early pay-off scenarios are for those who have little to no debt. They will show you how much time and money you can save by paying extra on credit cards and auto loans.

If you do have debt, we’d encourage you to also use the calculators for your current debt situation.

Credit Card Pay-Off

How much interest can you save by increasing your credit card payment? This financial calculator helps you find out.

View the report to see a complete payment schedule, and how much you can save.

1. Access the calculator here.
2. Current balance: put in $3000
3. Interest Rate: put in 17.5%
4. Payoff Goal: put in 36 months
5. Current Monthly payment: put in $110
6. Additional Monthly Charges: put in $0
7. Annual Fee: put in $35
8. Click on Calculate.

With these calculations, you would have a $110 payment every month for the next 36 months.

Now, do the following on the calculator:

In the additional monthly payment section, put in….

• $50- What is the total now for months and interest?
• $100- What is the total now for months and interest?
• $200- What is the total now for months and interest?

Auto Loan Pay-Off

How much interest can you save by increasing your auto loan payment? This financial calculator helps you find out. View the report to see a complete amortization payment schedule, and how much you can save on your auto loan!

1. Access the calculator here.
2. Number of Months Remaining: put the number 60
3. Loan Term Months: put the number 60
4. Auto Loan Amount: put in $20,000
5. Additional Monthly Payment: put in $0
6. Annual Interest: put in 5%
7. Click on Calculate.

The yellow line on the graph shows number of months until your car is paid for, the blue line shows how much you paid in interest.

With these calculations you would have a $377.42 payment every month for the next 60 months and pay $2645.52 in interest.

By paying more than the minimum payment every month, you can drastically cut the amount of time it takes to pay off your debts. In this scenario, it can go from 36 months to 14 months. That’s a difference of almost two years!

Now, do the following on the calculator:

In the additional monthly payment section, put in….

• $50- What is the total now for months and interest?
• $100- What is the total now for months and interest?
• $200- What is the total now for months and interest?

By paying an additional $250 a month, you pay your car off in 39 months instead of 60 months and you save just over $1000 in interest payments!

The Snowball Strategy

Please Note – If you do not have any debt, but fit under the Track 2 category, we’d encourage you to complete Track 1 for today’s application. And by the way, great job being out of debt and we pray you stay that way!

The Listing Your Debts & Snowball Strategy worksheet will assist you in compiling your debts and prioritizing repayment. It also reveals the extent of your debt situation.

The columns are as follows:

• Creditor — The one to whom the debt is owed.
• Balance Due — The amount of the current debt.
• Monthly Payment — The amount of the monthly payment. If payment is due more or less often than monthly, calculate the average amount paid each month.
• Interest Rate — The rate of interest charged for the debt.
• Scheduled Pay-off Date — The date by which the debt will be fully paid.
• Snowball Priority — Number the debts in the order you are going to pay them off.

We’ll also show you how to use the Snowball Debt Calculator in the Snowball Strategy. In addition to making the minimum payments on all your credit cards, focus on paying off the smallest-balance-card first. You’ll be encouraged to see its balance go down, down, and finally disappear!

After the first debt is paid off, apply its payment toward the next-smallest one. After the second debt is paid off, apply what you were paying on the first and second toward the third-smallest. That’s the snowball in action!

When you’re on a roll like this, it starts getting exciting. Those “impossible” balances that have worried you and robbed you of your peace will begin diminishing before your very eyes.

Download the Snowball Strategy (PDF) | Example